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### Viewing cable 09REYKJAVIK223, PARLIAMENT PASSES A BEVY OF BILLS BEFORE THE NEW YEAR

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Reference ID | Created | Released | Classification | Origin
--- | --- | --- | --- | ---
09REYKJAVIK223 | 2009-12-23 13:01 | 2011-01-13 05:05 | UNCLASSIFIED//FOR OFFICIAL USE ONLY | Embassy Reykjavik

`

    VZCZCXRO4097
    PP RUEHIK
    DE RUEHRK #0223/01 3571346
    ZNR UUUUU ZZH
    P 231346Z DEC 09
    FM AMEMBASSY REYKJAVIK
    TO RUEHC/SECSTATE WASHDC PRIORITY 4242
    INFO RUEHZL/EUROPEAN POLITICAL COLLECTIVE PRIORITY
    RUEATRS/DEPT OF TREASURY WASHINGTON DC PRIORITY
    RHEHNSC/NSC WASHDC PRIORITY
    RUCPDOC/DEPT OF COMMERCE WASHDC PRIORITY

` `

    UNCLAS SECTION 01 OF 02 REYKJAVIK 000223

    SIPDIS

    SENSITIVE

    TREASURY FOR NORTON
    NSC FOR HOVENIER
    COMMERCE FOR DERSTINE

    E.O. 12958: N/A
    TAGS: GTIP PGOV PREL ECON EFIN IC
    SUBJECT:  PARLIAMENT PASSES A BEVY OF BILLS BEFORE THE NEW YEAR

    REFS: A) Reykjavik 219 B) Reykjavik 202 C) Reykjavik 198 D)
    Reykjavik 176

    REYKJAVIK 00000223  001.2 OF 002

    ¶1. (U) Summary:  The Icelandic Parliament worked diligently in the
    days leading up to its holiday recess and passed a number of key
    pieces of legislation.  Over the weekend of December 18-20,
    parliament passed 18 bills including a new environmental tax and
    amendments to the General Penal Code that clarify Iceland's
    definition of trafficking in persons.  On December 21, parliament
    passed a heavily debated tax bill that is expected to generate an
    additional ISK 44 billion ($343.2 million) in revenue in 2010.  The
    following day, parliament passed a controversial budget bill that
    slashes government services and social spending.  The parliament
    then adjourned for a short holiday recess. It intends to reconvene
    next week and may vote on the Icesave bill at that time.  End
    Summary.

    ¶2. (U) The Icelandic Parliament worked diligently over the weekend
    of December 18-20 and passed an astounding 18 bills in the two-day
    period.  The most notable bills include a new environmental and
    resource tax which will add a charge of ISK 0.12 (0.0009 cents) per
    each kWh of energy sold and a two percent charge to the retail price
    of hot water.  The government will also assess an ISK 2.60 to ISK
    2.90 (2 cents) carbon tax on each liter of diesel oil, gasoline and
    jet fuel.  In addition, the legislature passed amendments regarding
    the contract to build an aluminum smelter in Helguvik, Southwestern
    Iceland, shortening the duration of the contract to 20 years and
    limiting tax exemptions.  Parliament also amended provisions on
    garnishment of assets, terrorism, organized crime, human trafficking
    and money laundering in the General Penal Code.  The Icelandic
    definition of trafficking in persons now mirrors the Palermo
    Protocol to the UN Convention against Transnational Organized Crime
    and thus clears the road for the protocol's ratification by
    parliament early next year.

    ¶3. (U) The tax bill passed by parliament on December 21 is expected
    to generate an additional ISK 44 billion ($343.2 million) in revenue
    in 2010.  Among the increases, the VAT will be raised by one
    percentage point to 25.5 percent, making it the highest VAT in
    Europe.  Parliament also expanded the personal income tax structure
    to three tiers:  annual income less than ISK 2.4 million ($18,700)
    will be taxed at 24.1 percent; income of ISK 2.4 - 7.8 million
    ($18,700 - $60,800) will be taxed at 27 percent; and, income over
    7.8 million ISK ($60,800) at 33 percent.  The capital gains tax will
    increase from 10 to 18 percent, and corporate taxes from 15 to 18
    percent.  Other taxes expected to affect consumers' wallets include:
    an average 14 percent tax on sugary products and restaurant
    activity; a 10 increase in automobile fees; and a 10 percent
    increase in alcohol and tobacco fees.

    ¶4. (U) Parliament passed the 2010 budget on December 22 with 33
    votes for the bill and 27 abstentions.  No member of the opposition
    voted in favor of the budgets passage.  Kristjan Juliusson, an MP in
    the Independence Party, criticized the coalition for having "given
    up" on the budget and said the government should have identified
    more cost saving measures.  Press reports, however, quote Finance
    Minister Steingrimur Sigfusson as saying that the budget results are
    very acceptable given the limited possibilities.  With the passage
    of the 2010 budget, the government projects a ISK 98.9 billion ($770
    million) deficit for 2010, a balanced budget for 2011 and a surplus
    by 2013.

    ¶5. (U) Parliament intends to reconvene next week amid rumors that it
    will vote on the Icesave bill before the New Year.  These rumors
    became more credible when the budget committee voted the Icesave
    bill out of committee on December 22, effectively clearing the way
    for a final vote.  The Icesave bill has been stalled in parliament
    for almost two months as the opposition, using filibustering
    techniques, delayed discussion on the controversial topic.
    According to media reports, the opposition would like even more
    discussion of the topic; however, it appears as though the coalition
    government does not want the issue to linger into the new year and
    intends to put an end to it now.

    ¶6. (SBU) Comment: The passage of so many bills, of which a large
    number are quite controversial, in such a quick and decisive manner
    signifies a change in the tactics of the ruling coalition.  Up until
    now, the coalition has allowed the opposition to have its say, even
    though it meant dragging out issues for months on end and delaying
    the nation's economic recovery.  It is unclear whether the coalition
    has the votes to pass the Icesave agreement next week; however, the
    coalition appears to want to resolve many of the thorniest issues
    from 2009 and start with a fresh slate in the new year.  End
    comment.

    REYKJAVIK 00000223  002.2 OF 002

    WATSON

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